MEXICO: An Introduction to Competition/Antitrust

Mexico: An introduction to Competition 

The 2013-2014 overhaul of Mexico’s legal and constitutional competition framework prompted the Federal Economic Competition Commission (COFECE) to become the main driver of competition enforcement, policy and advocacy in the country.

In a country where private antitrust litigation does not exist and that has not traditionally seen class actions, COFECE’s ex post behavioural and structural investigations, as well as ex ante merger control authorisations, pave the way for developments in the competition practice area in Mexico.

COFECE enjoys constitutionally granted autonomy from other branches of government and it fully exercises it. It has also successfully defended its jurisdiction in court against other authorities, including the Federal Telecommunications Institute (IFT), the only other antitrust agency in the country (solely for the telecoms and broadcasting sectors).

Below we outline relevant developments, enforcement trends and recent cases underscoring the current landscape of competition law in Mexico.

New Commissioners, New COFECE?  

After facing great uncertainty during 2021 and 2022, COFECE’s seven-strong Panel of Commissioners is finally complete again in 2023. The Mexican Supreme Court issued a ruling that forced the Executive Branch to nominate three vacant positions in COFECE’s decision-making body. The seats were filled in early 2023 following the Senate’s confirmation and COFECE is now able to resume important cases and take internal organisation decisions that require a five-member quorum.

The new commissioners are Ms. Andrea Marván (also the new chairperson), Mr. Giovanni Tapia and Mr. Rodrigo Alcázar. They all have previous experience working at COFECE and are young and well regarded. Their appointments may bring an opportunity for COFECE to update its enforcement policies and priorities.

Economists have typically led COFECE (save for the recent interim chair of Ms. Brenda Hernández), but Ms. Marván’s (a lawyer) tenure as chair may bring changes in COFECE’s enforcement practices in connection with due process and fundamental rights. Mr. Tapia’s appointment may also provide COFECE with much needed perspective on the private sector’s point of view and needs, as he was formerly practicing in a private firm. Mr. Alcázar’s appointment may contribute to more technical economic analysis within the Panel.

Jurisdictional Conflicts vs IFT  

Jurisdictional conflicts between COFECE and IFT are still expected in the coming year. IFT continued a 2020 investigation on barriers to entry and essential inputs (docket AI/DC-001-2020) where federal courts had split jurisdiction between the agencies (COFECE did not). IFT was granted jurisdiction to investigate markets for services related to mobile operating systems; while COFECE will investigate social media, search and cloud computing markets. In January 2023, IFT issued a preliminary report claiming a lack of effective competition in software for mobile operating systems (and other devices), but included Google in its conclusions. The case is far from over, as final determination by IFT’s own Panel is pending. The still unsettled legal question is whether IFT is extending its jurisdiction over mobile operating systems to other markets that should be COFECE’s purview.

Both COFECE and IFT recently opened investigations into potential vertical restraints (practicas monopólicas relativas) in similar markets. COFECE announced in September 2022 that it had opened an ex officio investigation (docket IO-005-2022) in the markets of (i) development; (ii) distribution; and (iii) payment processing of mobile apps and digital content. IFT announced in October 2022 that it had opened an investigation following a complaint (docket AI/DE-002-2022) in the markets of (i) app stores of mobile operating systems; and (ii) related markets; and another complaint-based investigation (docket AI/DE-004-2022, initiated in April 2023) was publicly announced in May 2023 with a similar scope in the markets for: app stores for mobile operating systems; and (iii) distribution of audiovisual content through online platforms.

The above procedures have the potential to trigger several new conflicts between Mexico’s antitrust agencies.

Merger Control and Enhanced Gun Jumping Enforcement

Merger Control  

In 2023, merger control cases had a slow start compared to 2022. At the beginning of 2023’s first quarter, COFECE had handled 47% fewer cases as compared to the same period of 2022. Compared to historical data, the figures ranked as the lowest number of new merger control notices since 2014 (when Mexico’s merger control regimen transitioned from “non-suspensory” to “suspensory”). However, by the end of March 2023, figures recovered to levels “only” 8% lower than in 2022. Global macroeconomic uncertainties may mean that 2023 will not be a record-setting year for these type of procedures in Mexico.

Gun Jumping  

COFECE’s trend (which began in 2017) of increasing gun-jumping enforcement is expected to continue during 2023. In 2022, COFECE opened six gun-jumping cases and as of May 2023, it opened three more.

Recent Enforcement Activity  

Throughout these years, the Commission has continued to focus on high-profile cases in “priority sectors” of the Mexican economy (including energy, commodities, health and public procurement). Recently, COFECE’s enforcement efforts have focused on financial, transportation and digital markets.

Cartels and Structural Investigations  

Bus Transportation  

In 2022, COFECE levied one of its largest fines in the transportation services industry. Under docket IO-003-2017, it levied fines on alleged cartel conduct (market segmentation) over several bus operators. All involved challenged the decision before federal courts.

COFECE also opened a structural investigation (docket IEBC-003-2022) on the existence of barriers to entry or essential inputs (facilities) in federal bus transportation services using bus terminals under federal permits. This investigation follows previous attempts from COFECE to find structural problems in transportation markets (e.g., following vertical restraints investigations in several airports; an unsuccessful essential facilities investigation regarding slots in the Mexico City airport and investigations on effective competition in railway transportation).

Financial Sector  

In 2023, COFECE initiated yet another investigation in the financial sector, this time focusing on no-interest promotions in credit card payments. The case is ongoing and no preliminary charges have been brought to date.

A final decision on the structural investigation on barriers to entry over Mexico’s clearing houses for card payments under docket IEBC-005-2018 had been suspended since early 2022 as a result of the COFECE Panel’s lack of quorum. The final decision must resolve whether to confirm, modify or revoke COFECE’s Investigation Authority’s findings and recommended remedies (including divesture measure of the banking entities’ stakes in the clearing houses) included in a preliminary report issued in late 2020.

In 2023, with the new commissioners’ appointment, the case was expected to be finally solved, but COFECE’s Panel once again delayed a final decision after identifying the case file had failed to consider certain evidence. In March 2023, the Panel partially resolved certain procedural matters involving the case, but did not deliver a final decision on the merits.

This case’s decision may display whether the new commissioners will subject COFECE’s Investigation Authority (which must act independently from the Panel and vice versa) to a higher standard to demonstrate the need for divesture remedies in structural barriers to entry investigations. On the contrary, the Panel’s confirmation of the Investigation Authority’s findings and proposed remedies could signal that COFECE’s new Panel will, in practice, continue to side with the Investigation Authority (as it has historically done) in most cases.

Digital Markets  

As described, above, both COFECE and IFT have been highly active in this sector. In addition to the previously mentioned investigations, during 2023, COFECE’s Investigation Authority is expected to conclude its current investigation (IO-003-2020) on potential vertical restraints in digital advertising markets. The Investigation Authority could close the case or issue a preliminary statement of objections (dictamen de probable responsabilidad), which would trigger a second trial-like stake to be conducted by COFECE’s legal division and ultimately be resolved by the Panel.

Criminal Enforcement 

Although cartel conduct is a federal crime since 2011, COFECE remains unsuccessful in bringing sufficiently robust complaints before the criminal prosecutors to open crime investigations or achieve convictions against individuals participating in cartels. This trend is not expected to change in 2023.